Q2 2020 result - 14 July 2020 - Henri de Sauvage-Nolting, President/CEO Frans Rydén, CFO Nathalie Redmo, IR
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Q2 2020 result – 14 July 2020
Henri de Sauvage-Nolting, President/CEO
Frans Rydén, CFO
Nathalie Redmo, IR
Key messages • Continued negative impact due to COVID-19 • Improved sales during the second half of the quarter • Branded food retail up, P&M and OOH branded sales down • EBIT impact partly mitigated by phasing of supply chain costs • Managing costs to continue investments in A&P • Solid financial position and clear strategic priorities ”Cloetta is well positioned for a gradual recovery.”
Agenda
1. Sales results
2. COVID-19
3. Financials
4. Strategic update
5. Q&A
Q2 2020: Improved sales during second half
Total Branded Pick & mix
Organic sales growth Organic sales growth Organic sales growth
-21.2% -6.3% -58.5%
April: -25.4% April: -3.6% April: -70.5%
May: -27.6% May: -16.6% May: -60.2%
June: -10.1% June: +1.5% June: -41.1%
Monthly organic sales growth Monthly organic sales growth Monthly organic sales growth
-12.6% organic sales growth YTD
Sales development
Sales in the quarter impacted by COVID-19
Branded, % of Q2 '20 sales
2,4% 3,6% 3,6%
0,6% 1,6% 1,4% 0,6% 1,4% April: -3,6%
May: -16,6%
-2,5% June: +1,5%
-6,3%
85%
Q1 ’18 Q2 ’18 Q3 ’18 Q4 ’18 Q1 ’19 Q2 ’19 Q3 ’19 Q4 ’19 Q1 ’20 Q2 ’20
Pick & mix, % of Q2 '20 sales 18,1%
6,4%
April: -70,5%
15% 0,0%
May: -60,2%
-3,3% June: -41,1%
-8,0%
-13,5% -11,4%
-15,6%
-19,4%
-58,5%
Agenda
1. Sales results
2. COVID-19
3. Financials
4. Strategic update
5. Q&A
Thank you to all our employees!
Managing through COVID-19
Consumers Production
& customers Employees Cost & cash
& suppliers
Consumers
& customers
Branded packaged products
Branded sales by channel*
Status of branded
• Increased demand in Food, including e-commerce
30% • Shoppers gradually returning as other channels
70% Food
starting to open up
Other channels
• Negative mix from less impulse sales
Actions to mitigate
Last 3 months market data**
✓ Continued investment in brands
PASTILLES & GUMS -7%
✓ Adjusting to new market and consumer realities
CANDYBAGS +39% ✓ Advertising spend adjusted to new media consumption
* Approximate % based on 2019 full year figures
**Nielsen, Kesko, SOK market data last 3 months 2020.
Candybags and pastilles; FI, DK, NO, SWE. Gums; FI.
Consumers
& customers
Pick & mix
Channels at Consumer Status of pick & mix
Q2 close demand
• Most Nordic fixtures opening
• Recovery of consumer demand will take time
• Unfavorable geographical mix
Actions to mitigate
✓ Store trials to convince retailers to open
✓ In-store communication and increased hygiene
✓ Repositioning of Candyking started
✓ Merchandising cost reducedConsumers Employees Production
Cost & cash
& customers & suppliers
Working under restrictions
✓ Travel ban
✓ IT step-up for virtual workplace
✓ Offices partly opened with meeting restrictions
✓ New office and concept store in Malmö
✓ Reinforced hygiene routines
✓ Strategic agenda kept goingConsumers Employees Production
Cost & cash
& customers & suppliers
Status of supply chain
• Factories operational
• Absenteeism back to normal
• High stock levels of P&M and OOH products
• Delay in CAPEX and Perfect Factory
Actions to mitigate
✓ Increased hygiene routines and separated shifts
✓ Policy restricting external visitors
✓ Inventory secured on critical components
✓ Measures to reduce inventory levels and avoid
obsolescence, such as production closuresConsumers Employees Production
Cost & cash
& customers & suppliers
VIP+ Perfect Factory Cash
✓ Tightened restrictions on spend ✓ Program runs virtual ✓ Loan extension finalized
✓ Acceleration of efficiency initiatives ✓ Production closures during summer ✓ Working capital program
✓ Closure of two warehouses ✓ Increased preventative maintenance ✓ Reduce current inventory levels
✓ Training of factory employeesAgenda
1. Sales results
2. COVID-19
3. Financials
4. Strategic update
5. Q&ANet Sales
Sales in the quarter impacted by COVID-19
Second quarter 6 months
-21,9% -12,3%
1 583 -21,2% 3 142 -12,6%
-0,7% 1 237 +0,3% 2 755
Branded packaged: -6,3% Branded packaged: -4,4%
Pick & mix: -58,5% Pick & mix: -33,7%
2019 Organic FX 2020 2019 Organic FX 2020
growth growthOperating profit, adjusted
Impact of lost volumes partly offset by cost savings and phasing of supply chain costs
Operating profit, adjusted
• Half of lost gross profit
Second quarter 6 months
mitigated. Gross profit down SEK
119 m, while operating profit, 10,2% 10,4%
adjusted, down SEK 51 m. 161 327
• Lower volume key driver of 8,9% -32
9,5%
262
loss, totaling SEK 126 m despite -12 110
-155
phasing of approximately SEK 35 m -126
122
in supply chain costs to Q3. 87
• Good cost control partly
mitigates volume loss, together
with positive mix due to lower share
of P&M. 2019 Volume Mix/Price FX 2020 2019 Volume Mix/Price FX 2020
/Cost /CostSG&A
Lower SG&A from good cost control and lower marketing activities
Second quarter 6 months
26,5% 28,7% 26,2% 27,1%
+65 +76
-355 -746
63 82
2 -2 -4
0
-822
-420
2019 Items FX Cost savings 2020
2019 Items FX Cost savings 2020
affecting
affecting
comparability
comparabilityCash flow
Cash flow impacted by lower profit
Q2 ‘20
122
• Lower profit drives lower Free cash flow -161
as higher investments in PP&E offset by lower -79
-118
increase in working capital.
-389
• Working capital driven by lower payables
due to reduced production and sourcing from third -507
party contractors, and cost savings. Inventory Cash flow Changes Investments Free Other Cash Cash flow
before in working in PP&E cash flow investing flow from for the
variance more than offset by lower receivables. changes capital and activities financing period
in working intagible activities
capital assets
• Cash flow from financing activities driven
by reduced debt. Activities last year also 201 Q2 ‘19
reflect payment of dividend. -204
-38 -41 2
-466
-505Strong financial position
2 361
2 124
115 Cash
• Good access to cash with
Non-current
2 112
Non-current facilities
1 259
facilities
extension of loan facility
maturing in July 2020 and all
facilities now non-current.
750 Commercial papers
249 Commercial papers
Utilized Unutilized • Continued compliance with
covenant requirements on Net
debt/EBITDA.
4.5 6 000
Covenant 4.0
5 000
3.5 Net debt/EBITDA • Cash pooling operational
3.0 4 000 enabling less cash on hand, less
Target 2.5 debt, and lower interest expense.
3 000
2.0
1.5 2 000
1.0
Net debt in SEKm 1 000
0.5
0.0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2017 2018 2019 2020Agenda
1. Sales results
2. COVID-19
3. Financials
4. Strategic update
5. Q&AKey business priorities
Prioritized activities for achieving organic growth and a 14% operating profit margin, adjusted
• Investments in brands to remain the preferred choice
1 •
•
Focus on marketing visible to consumers
Adjusting advertising spend to new media consumption
• Next steps in Marketing Competence - Academy
• Repositioning of Candyking to a more premium concept
2 •
•
Rebuilding profitability through scale, pricing and efficiency
Contract negotiations
• Category supported by global trends
• Efficiency initiatives delivering, new cost savings identified
3 •
•
Enhanced management processes to monitor working capital
Gear up CAPEX and Perfect Factory roadmapBranded growth
Fewer and bigger
Accelerating strategic initiatives
Focus on marketing visible to consumers
Share of working media vs. non-working media
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 LTM
Working media Non-working mediaWe believe in the Power of True Joy
Purpose impact on our new CSR agenda
KEY AREAS
We provide We care about We improve
choices for you people our footprint
We create joyful moments Our business depends on
We support our employees,
through the quality of our the environment. We own
our suppliers and farmers, as
products. We aim to meet the our responsibility for our
well as our communities.
variety of consumer impacts; from sourcing to
preferences. packaging.
Strengthening
Q2 HIGHLIGHTS
Goal-setting Future-focused
Relationships
• Strategic goals set to develop • Exploring positive impacts • Launched PlantPack, a
our offering to meet more across our supply chain with step closer to future-proof
consumer needs while stronger partnerships between plant-based packaging
upholding sustainability our suppliers and 3rd party • Our factories achieved
standards and product quality. organizations. RSPO & UTZ certificates.Repositioning of Candyking
Build a brand in order to drive premium pricing
Social media and in-store activation Higher quality and premium concept
Attractive merchandising and signage Hygiene and tidinessDrive efficiencies to
enable investments
Perfect Factory ONE Cloetta
VIP + CashH2 2020: Expected impact from COVID-19
Branded • Sales in non-food to continue to gradually improve as
restrictions ease.
packaged
products • Product mix to gradually return to normal.
• Fixtures re-opening with a delay in UK.
Pick & mix
• Several quarters until the full consumer demand returns.
Operating • Q3: Expected to be significantly lower than prior year.
profit,
• Q4: Expected to gradually strengthen to double-digit margins.
adjustedAgenda
1. Sales results
2. COVID-19
3. Financials
4. Strategic update
5. Q&AQ&A
29 Appendix
Distinct trends supporting Cloetta
1 2 3 4 5
Local brands Market High-growth Environment Providing
Opportunity Channels choice
”Wide range of growth opportunities”1. Consumer trend towards local brands
*Source: ‘Who’s finding growth?, Multinational, Regional or Local Players, Nielsen, QBN, 2017
Share of people increasing their
consumption of locally produced food**
34% 23%
**Source: YouGov Food & Health Nordic 2018
17% 22%
Portfolio of leading local brands “Confectionery is among top third of FMCG
categories when ranked by preference for
local brands.”*2. Market growth opportunity
Northern Europe market is growing in value Huge potential in international markets
Projected growth in $
per capita confectionary 2019 market size
Confectionary market, m€ CAGR 1,9% consumption 2019-2024 in value
8 000
7 000 Asia 14% 37 bn$
6 000
5 000
Middle East, 14% 3 bn$
4 000
North Africa
3 000
East
2 000 Europe 17% 23 bn$
1 000
North
2013 2014 2015 2016 2017 2018 2019
America 5% 44 bn$
Source: GlobalData, branded confectionery sector in SE, DK, NO, FI, NL Source: Global Data Confectionary database 20203. Opportunity in impulse channels
New channel development Confectionary e-commerce growth 2014-2019
111%
161%
Furniture Pharmacies 92%
Non food discount
66%
182%
Source: GlobalData,Sugar confectionary category, value change between 2019 and 2014
Travel DIY stores4. Packaging innovations - less and better plastic
P&M ambition
to go
plastic free
“56% of consumers look for
“70% of shoppers mention environmentally friendly
plastic as a top concern.” packaging when buying food
Source: GFK Who cares? Who does? report 2019 and beverages.”
GFK FMCG outlook report 20205. Providing choice
Global: most appeling sugar/ sweetener related
claims* when choosing food and drinks ( top 5).
NATURALLY SWEETENED 25%
FREE FROM ARTIFICIAL SWEETENERS 24%
SUGAR FREE 21% Share of people decreasing
sugar consumption
NO ADDED SUGAR 18%
CONTAINS REAL SUGAR 8%
33% 31% 29% 26%
Source: GobalData’s Q4 2017 global consumer survey
Source: YouGov Food & Health Nordic 2018Disclaimer
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statements involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the Company’s control and may cause actual results or
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operate profitably, maintain its competitive position, to promote and improve its reputation and the awareness of the brands in its portfolio, to successfully operate its
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